OneWeb, which emerged from bankruptcy in 2020, hopes a merger with Eutelsat will help turn its fortunes around.
Jodi Amiet | AFP via Getty Images
British satellite operator OneWeb plans to join forces with European rival Eutelsat in a deal it hopes will help them take on Elon Musk’s SpaceX.
As a result of the all-share merger, Eutelsat will issue 230 million new shares and exchange them for all remaining OneWeb shares, according to a press release on Tuesday. Shareholders of OneWeb and Eutelsat will own 50% of the combined company respectively. The deal values OneWeb at $3.4 billion.
After the merger, the combined entity is expected to generate approximately 1.2 billion euros ($1.22 billion) in revenue in the 2022-23 fiscal year, the companies said.
Eutelsat’s Dominique D’Hinnin and Eva Bernecke will continue in their roles as chairman and CEO of the combined entity, with OneWeb stalwart Sunil Bharti Mittal as co-chairman.
D’Hinnin, chairman of Eutelsat, said the deal would help the companies “take advantage of the significant growth opportunity in communications”.
“This combination will accelerate the commercialization of the OneWeb fleet while enhancing the attractiveness of Eutelsat’s growth profile,” he added.
OneWeb wants to deploy 648 low-Earth orbit satellites to help bring broadband to rural areas with limited Internet access. It currently has 428 satellites in orbit, which will now be combined with Eutelsat’s fleet of 36 geostationary satellites.
OneWeb, long touted as a rival to SpaceX’s massive Starlink satellite internet project and Amazon’s own Kuiper project, has struggled to turn its lofty ambitions into a viable business model.
The company emerged from bankruptcy in 2020 with the help of the UK government, having burned through billions of dollars in venture capital. The government provided $500 million in a bailout package for the firm.
The startup was also affected by a freeze on rocket launches from Russia following Moscow’s invasion of Ukraine, and was forced to turn to SpaceX for support.
OneWeb hopes the merger with Eutelsat will help turn its fortunes around, with CEO Neil Masterson calling it “another bold step” in helping the company achieve its mission.
“This combination will accelerate our mission to deliver life-changing connectivity at scale and create a fast-growing, well-funded company that will continue to create significant value for our shareholders,” said Masterson.
Tuesday’s takeover left investors unconvinced, with Eutelsat shares trading at their lowest level since late 2020. Eutelsat said it would temporarily suspend its dividend to focus on the rollout of its OneWeb satellite group.
The transaction is subject to various regulatory approvals, including a rigorous national security review process in the UK. It is expected to be completed by the first half of 2023.
The deal excludes a “special stake” owned by the UK government, which gives it a say in matters of national security, including the security standards of OneWeb’s network and the location of its headquarters.
London is reducing its control of the once-space venture at a politically fraught time. Members of the ruling Conservative Party are set to decide who will be the next leader of Great Britain after the resignation of Prime Minister Boris Johnson.
The Tory faithful surely want a prime minister who can protect Britain’s valuable assets from foreign takeovers – especially those originating from the EU – after Brexit.
The issue of foreign takeovers has become particularly acute in the context of Nvidia’s failed bid to acquire British chip designer Arm and the sale of semiconductor firm Newport Wafer Fab to a Chinese-owned company.
Under the terms of the deal, OneWeb will continue to trade under its existing name and retain its UK headquarters. Paris-listed Eutelsat plans to seek an additional listing on the London Stock Exchange.
But the deal also sees the government join Eutelsat’s peculiar slate of shareholders, including the Chinese state. This could raise eyebrows among Britain’s closest allies, not least the US
Eutelsat already took a stake in OneWeb last year as part of a post-ejection funding round. Other OneWeb backers include Indian tycoon Sunil Bharti Mittal and Japanese technology investor SoftBank.
OneWeb and Eutelsat agree $3.4 billion merger to rival Elon Musk’s SpaceX
Source link OneWeb and Eutelsat agree $3.4 billion merger to rival Elon Musk’s SpaceX